It has been a while since we have seen such bad performance in the stock market. 2000-2002 to be exact, when the NASDAQ tech stocks dropped 80% and the S&P 500 dropped about 40%.

Currently, the S&P 500 is down about 18% from its 2007 peak, and the NASDAQ is down about 24%.

So one of the only useful things we can do at a time like this is to reevaluate our “true” risk tolerance level. When the market is going up, all of us are fine with maximum risk. It is only when the market declines that we get an opportunity to really see if we are comfortable with the risk we are taking.

How are you feeling right now? Are you still a believer in the fact that if you want the higher long term rates of return of the stock market, you will have to live through the inevitable market declines?